Oil in the Middle East: Blesses and Curses of the “Black Gold”

Oil represents one of the most crucial elements to fully understand the dynamics of the Middle East and North Africa region. The region is home to about half of the entire proved World oil reserves. Oil fields, however, are not equally distributed among all the States of the region. Instead, the majority lies in the Gulf States. Saudi Arabia alone holds around 17% of the known oil reserves, immediately followed by Iran and Iraq – respectively with 9% and 8.4%.

On the other hand, North African countries account for less than 4% of the entire world’s reserves, with 2.8% of this exclusively held by Libya. Algeria, Egypt, and Tunisia are usually accounted as oil countries, although their national reserves are very limited.

The unequal distribution has undoubtedly created a disparity between oil-rich countries and their counterparts. However, that’s not all gold that glitters: not only has oil bought obviously blesses but also evident curses on the region.

The Blesses

First and foremost, oil has given great opportunities to make huge profits. As a matter of fact, some of the Gulf countries are among the top oil exporter in the world, maintaining this position for decades.

It is esteemed that the national Saudi Arabian oil company – Aramco – in 2018 alone has generated income for 111.1 b$, being the most profitable company in the world, while Qatar is today the country with the highest GDP per capita. Given the high share of the world’s reserves, Middle Eastern oil is sold everywhere in the world.

Secondly, from a political perspective, it has been noted that some oil-rich countries – especially the ones in the Arab Peninsula – could never be existing without their reserves. The revenues from oil have given them the opportunity to consolidate very quickly internally and overcome any kind of bureaucratic and social problems. This has recently been visible during the so-called “Arab Springs,” where the Gulf countries have maintained relative stability thanks to a combination of repression and economic guarantees to the population in the form of new jobs and benefits.

Besides, oil has boosted the creation of regional alliances and international organizations such as the OPEC and the Gulf Cooperation Council (GCC), which has given the oil-rich countries a way to transform their natural resources into political weapons. This has been particularly true during the 1973 Arab–Israeli War when the Arab States embargoed Europe and the USA to support Israel, provoking a price shock in the Western World.

The Curses

On the other hand, oil has also brought some misfortunes to the region. Since 1908, the region has experienced intrusions of non-regional powers – the United Kingdom, USA, Russia and China, among others – which have inevitably generated chaos in the Middle East.

Oil has also boosted the birth and the establishment of despotic States in the region. As a matter of fact, most of the oil-rich countries are ranked among the worst countries in the world for what concerns civil and political rights. They are usually labeled as authoritarian States with little or no political participation, elections and civil liberties.

The academic world has investigated the correlation between “plutocracies” and the scarcity of democratic values. Countries that are so dependent on their oil exportation have been identified as “rentier State,” that is to say, a State where the wealth is generated exclusively by external rent. Moreover, this capital is held in the hands of a few – that usually represent the government – and it is then redistributed among the majority in the form of public services.

A rentier state, essentially, earns its richness exclusively from abroad and not from, for example, through an internal tax system. Therefore, it is freed from every democratic obligation given to its citizens, reversing de facto the classic formula to “no representation without taxation.” This, in contrast, makes the rentier States particularly dependent on external support and weak on the international level.

The Future

In 2020, for the first time in decades, the oil price had vertiginously dropped mostly due to the Covid-19 pandemic and the following Russian-Saudi oil war. Even if the price per barrel seems now to be on the rise again, such a loss for the oil-dependent countries can be a warning sign for their economies and stability.

As said before, governments of oil-rich countries have, until this moment, used the revenues made from exportations to prevent political upheavals. Such a fall in the oil prices can therefore result in challenging situations for these countries. In the case they would not be able to guarantee certain living and economic standards inside their countries, the “no taxation without representation” slogan could certainly be heard in the streets from Riyadh to Abu Dhabi, mining the authoritarian power.

In order to prevent these uneasy situations, oil-rich countries have issued numerous plans to diversify their economies. Gulf countries are taking different approaches that span from investment in renewable energies, to the touristic sector or to the openings towards the private sector of small and medium enterprises. In addition, they are also trying to magnify their role as economic and trade hubs between Asia, Africa and Europe.

Economic diversification, therefore, is of pivotal importance for the oil-rich countries, especially the Gulf ones. The success of these policies not only depends on their importance on the regional and international level but possibly their very existence.

References
Beblawi, H., 1990. The Rentier State in the Arab World. In: The Arab State. Londra: Routledge, pp. 85-98.
Hinnebusch, R., 2015. The International Politics of the Middle East. Manchester: Manchester University Press.
Luciani, G., 2019. Oil and Political Economy in the International Relations of the Middle East. In: International Relations of the Middle East. Oxford: Oxford University Press, pp. 107-131.
Mishrif, A. & Al Balushi, Y., 2018. Economic Diversification in the Gulf Region, Volume I: The Private Sector as an Engine of Growth. s.l.:Palgrave Macmillan.